(Archived Content)
The U.S. Treasury and the Japanese Ministry of Finance met in Tokyo today to review progress under the U.S.-Japan financial services agreement announced in Washington last January by President Clinton and then-Prime Minister Murayama.
Reporting on the results of the meeting, Treasury Deputy Secretary Lawrence H. Summers expressed general satisfaction with the Japanese Government's implementation of the agreement so far. We are reasonably pleased with the way things are going, Summers said. The Japanese Government has delivered an extensive number of legislative and regulatory changes required under the agreement to open up new opportunities in the financial sector. We are also encouraged by the significant additional deregulation of the corporate pension market now under consideration.
We are already seeing some encouraging signs of progress on the ground in terms of new business for foreign financial institutions in the areas of asset management and corporate finance, Summers said.
Summers emphasized Treasury's commitment to continue an intensive follow-up process to monitor implementation of the Japanese commitments in the agreement.
Summers also said Treasury would continue to be engaged in promoting deregulation and liberalization in the Japanese financial market. Looking forward, we want to continue to encourage positive changes in the Japanese financial system, he said. Improved transparency and stronger disclosure standards and the development of a more active domestic capital market, including a functioning asset-backed securities market, are important steps in responding to the challenges now facing the Japanese economy and its financial system.
Fact Sheet: Progress Under U.S.-Japan
Financial Services Agreement
February 6, 1996
Following is a list of significant changes in the Japanese financial markets that have been implemented in accordance with the U.S.-Japan financial services agreement:
Fund Management
The JCY 1995 budget, approved in March 1995, gave investment advisory companies (IACs) full access to the $200 billion public pension fund market. The first IAC mandates, totalling roughly $850 million, were awarded in January 1996. U.S. firms won two of those mandates.
As a result of the elimination of restrictions on the corporate pension market, private pension fund assets under management by foreign IACs rose by more than one-third between March 1995 and September 1995.
Balanced investment requirements on managers of public and private pension funds have been substantially liberalized, increasing the scope for specialization.
An advisory body to the Ministry of Health and Welfare issues a report in June 1995 supporting the revision of pension actuarial standards from a book-value to a market-value basis. The new standards will be written by this summer implemented in JFY 1997. At today's meeting, the Finance Ministry reaffirmed its support for market-value accounting and its expectation that the actuarial standards will be revised by mid-1996.
Effective February 1, 1995, find managers were permitted to conduct investment trust (mutual fund) and pension fund management fund activities in one entity, significantly lowering the costs of entering the fund management business in Japan. The number of foreign firms licensed to engage in the Japanese mutual fund business has doubled from five before the agreement to ten today.
Corporate Securities
In February 1995, the Finance Ministry announced a list of newly permissible financial instruments, including a range of foreign-originated asset-backed securities, exchangeable bonds, and dual currency bonds with currency options.
At today's meeting, the Finance Ministry stated its commitment to introduce a domestic asset-backed securities market by the end of the current fiscal year (March 1996).
Effective January 1, 1996, minimum rating requirements and financial criteria on all Japanese corporate bond issues at home and abroad were eliminated. Effective April 1, 1996, the listing requirement for domestic commercial paper (CP) issuance will also be eliminated, and the minimum rating requirement lowered.
In February 1995, the Finance Ministry implemented transparent procedural protections for new financial instruments which bring the Japanese regime closer to the U.S. Securities and Exchange Commission's no action procedures.
Two foreign brokerage houses for the first time won solo lead management mandates for Japanese domestic corporate bond issues worth roughly $100 million each.
Cross-Border Capital Transactions
In April 1995, the Finance Ministry introduced a new, simplified approval and notification system for many cross-border capital transactions, such as euroyen and samurai securities offerings. The Finance Ministry has granted a total of 466 comprehensive approvals for non-resident issues of euroyen securities and accepted 104 comprehensive notifications for resident securities issues offshore. No applications for comprehensive approval/notification were denied, and no conditions or limitations imposed on issuance.
The 90-day offshore seasoning period on non-resident euroyen issues was eliminated (ahead of schedule) in August 1995, The offshore seasoning period on resident euroyens will be shortened from 90 days to 40 days, effective in April, 1996, in anticipation of its total elimination by April 1998.
In April 1995, restrictions were lifted on Japanese corporate investors' access to a wide range of financial instruments available outside Japan.